Automatic exchange of tax information
between Andorra and the European Union

On the 1st of January of 2017, the Law 19/2016, of 30 November, on automatic exchange of tax information came into force. It reflects the principles laid down by the Organisation for the Economic Co-operation and Development (OCDE) among the different authorities of the state members, regarding the automatic exchange of specific customer tax information.

 

In accordance with this law, the Ministry of Finances of Andorra will exchange information on a yearly basis with specific countries and this exchange will be based on the disclosures made to the Government of Andorra by Andorran financial entities.

 

This law is based on the amendment of the Automatic Information Exchange Agreement among the European Union state members and the Principality of Andorra, with the application of the common OECD standards for the communication and due diligence standards regarding information on financial accounts (Common Reporting Standard OECD, or CRS).

 

What is the main goal of the CRS?

 

This new CRS standard (Common Reporting and Due Diligence Standard) is directed towards combatting international tax evasion through cooperation among the tax agencies, and obliges the signatory states to obtain information from financial institutions and exchange it automatically with the remaining states, on a yearly basis.

What does the CRS mean for financial entities?

 

In compliance with this law, Vall Banc, SAU, as well as the other Andorran financial institutions, is obliged to report information on financial accounts, in the terms established by the articles and the annexes of Law 19/2016, when natural persons or entities holders of an account, or natural persons exercising control over passive non-financial entities (ENF) holders of an account, are tax residents in:

 

  1. A European Union member state.
  2. A state with which an agreement or an arrangement is enforceable and it establishes an automatic information exchange following the OECD standards for disclosure and due diligence standards in relation with information on financial accounts.

 

Main obligations of the financial entities as per the Law 19/2016 and the CRS


Vall Banc, SAU, as a duly authorised financial entity, is affected by this law and from 1st January 2017 is obliged to collect specific accurate information from customers, among which are the tax residence of individuals that are holders of or control specific financial accounts and, in accordance with certain clearly defined criteria of the law, it must report this information to the Ministry of Finance.

 

The scope of the Law 19/2016 includes the opening and the use of accounts, both of natural and legal persons.

 

In accordance with the CRS standards, customers can be reported under the following circumstances:

 

 

  • Natural persons: Those with fiscal residence in a country other than Andorra*.
  • Legal persons: Classified as passive for the purposes of CRS, which means that generally their main activity consists in the investment of financial assets and they cannot be classified in any of the categories as active entities, for the purposes of CRS standards, and their significant shareholders have their fiscal residence in countries other than Andorra*.

 

What is the impact of CRS for individuals residing in the Principality?

 

This regulation has no impact on individuals that are tax resident in Andorra.

 

To prove this condition (tax residence), a self-declaration must be obtained and filled in for each customer with documentary proof that in support of his/her declaration.


Should a customer refuse to fill in the self-declaration document or not provide the requested documentary proof, the regulation obliges the financial entities to disclose his/her accounts to the Ministry of Finance, as accounts subject to be reported.

 

More information regarding the FATCA and CRS standards can be found on the Government website

 

* The Government of Andorra will update the list of countries with which Andorra will conduct the automatic tax information exchange, on a case-by-case basis.

 

For further information, write us at vallbanc@vallbanc.ad or visit your advisor. We will be glad to help you.